Problem 4-20 Predetermined Overhead Rate; Disposition of Underapplied or Overapplied Overhead [LO4-1, LO4-4, LO4-5]

Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours 83,000 Fixed manufacturing overhead cost $ 1,275,000 Variable manufacturing overhead per computer-hour $ 3.60 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the companys warehouse. The companys cost records revealed the following actual cost and operating data for the year: Computer-hours 50,000 Manufacturing overhead cost $ 1,014,000 Inventories at year-end: Raw materials $ 420,000 Work in process $ 190,000 Finished goods $ 1,050,000 Cost of goods sold $ 2,700,000 Required: 1. Compute the companys predetermined overhead rate for the year. (Round predetermined overhead rate to 2 decimal places.) 2. Compute the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.) 3. Determine the cost of goods sold for the year after any adjustment for underapplied or overapplied overhead. (Round predetermined overhead rate to 2 decimal places.)